3 Stock Charts for Thursday: KLA-Tencor, Invesco and Weyerhaeuser

In all three cases, traders have to take a big step back to see what's taking shape

It wasn’t easy or pretty, but the market managed to tack on a bit of a gain on Wednesday. Though yesterday’s 0.13% advance from the S&P 500 was nowhere near Tuesday’s rally, it’s still another step forward. The index’s close of 2,907.95 was the second-best close ever.

Still, it’s not clear if the broad market would have ended the day in the black had it not been for some roaring pot stocks. There were more losers than winners on Wednesday, and none of the biggest and most active winners weren’t terribly familiar or big names. Market darling Advanced Micro Devices (NASDAQ:AMD) gave up 2.3% of its value as traders started to second-guess the viability of the recent rally.

Level-headed traders would be wise to avoid the temptation that marijuana-related names like Tilray (NASDAQ:TLRY) and Cronos Group (NASDAQ:CRON) are manifesting though. The sustainability of those uptrends is in question.

Weyerhaeuser (WY)

If the name Weyerhaeuser rings a bell, there’s a reason. It was one of the three stock charts put under the trading microscope back on Monday of this week. At the time, the stock was putting pressure on a long-term support line that — if broken — could open the selling floodgates.

That happened on Wednesday, and along with that, another shorter-term technical floor was snapped. Yet, that’s not even the most alarming red flag.

Click to Enlarge • On the daily chart, the floor in question is $33.94, plotted with a yellow dashed line. In retrospect though, we can look back and say this meltdown was ultimately set up by resistance at the 50-day moving average line last month.

• In the weekly timeframe the floor that was broken is the one that tagged all the major lows going back to mid-2016. Already fighting an uphill battle, the sellers finally broke below that line too thanks to Wednesday’s tumble.

• The volume surge on the daily chart was accompanied by a strong, persistent rise in volume. For the first time in a long time, most investors are increasingly having doubts. That could fan the selling flames.

Invesco (IVZ)

This year has been, to put it bluntly, a miserable one for Invesco shareholders. The stock is off 37% from its January peak, and it’s not even entirely clear why. The money management business has been fine (if not quite good), and although it’s a somewhat dividend-oriented name, it was punished more than its dividend peers.

Whatever the ultimate reason, it looks like investors are starting to rethink their doubts. Though not in full-blown recovery mode yet, there are enough bullish clues starting to take shape that Invesco has at least earned a spot on watchlists.

Click to Enlarge • On Wednesday, IVZ moved above its 20-day moving average line, plotted in blue on the daily chart. While we’ve seen this happen before, we’ve not seen it in this context … the context of a bullish MACD crossover on the weekly chart.

• There are a couple of resistance lines that need to be hurdled to put the finishing touches on the breakout effort. One of them is the upper resistance line on the weekly chart, marked with a white dashed line. The other is the 50-day moving average line on the daily chart, plotted in purple.

• Given the sheer scope of the selloff, once a rally takes hold it could explode with little to no warning.

KLA-Tencor (KLAC)

Last but not least, with just a quick glance it looks like KLA-Tencor shares are just bouncing around, as they usually do. All of the recent pullbacks were countered with equally big rebound.

This current meltdown, however, looks and feels a bit different than the other ones. This time around, it’s happening against a backdrop of slowing momentum and a move under a major technical floor.

Click to Enlarge • Chief among the red flags is the face that KLAC has broken below the support line, plotted with a white dashed line, that’s reversed all the selloffs seen since the middle of last year.

• Simultaneously, though it’s a bit difficult to see, all of the key moving average lines are converging. This is ultimately the result of waning momentum, and an undeniable sign of it. Both accumulation-distribution lines are now into multiweek low territory.

• There’s still a sliver of a chance KLA-Tencor could pull itself out of trouble, but one or two more bad days could unleash the selling volume that’s already started to pick up the pace.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.